A Strong Consolidation Wave Sweeping the Next-Gen Services Market

Today’s announcement of TelePacific’s Acquisition of Telekenex provides another boost to a strong consolidation wave that started some time back in 2009, but gained more power in 2010. This acquisition enhanced TelePacific’s CLEC portfolio, which includes next-gen trunking services, with a set of additional capabilities, such as:

A robust hosted PBX platform with nationwide voice capabilities

A nationwide PCI-compliant MPLS backbone

A fiber network in the San Francisco-Oakland Bay Area

Managed network services providing advanced configuration and support for complex network deployments and

Managed security services through a cloud-based firewall

According to my estimates, Telekenex is adding between 15,000 and 20,000 hosted telephony seats (mostly multi-site SMBs) and about $30 million to $50 million in annual revenues to TelePacific’s portfolio.

As the market becomes increasingly competitive, it becomes compelling for LEC organizations with managed network services to merge with hosted/cloud applications providers so they can diversify their portfolios and offer customers a broader set of communications solutions and capabilities. Examples of similar developments over the past year include:

Further M&A activity is expected over the next couple of years. With over 60 providers in the North American hosted telephony market, there is plenty of room for providers to join their forces for healthier competition going forward. As businesses look for a trunking or hosted communications provider, they need to take the following factors into consideration in order to make a good choice:

Network reach

Service management and demark: does the provider manage the service all the way to the desktop